In a commonplace financial arrangement, a customer (e.g., an account holder) of a financial institution (e.g. a bank) opens an account by depositing a value of currency into the account. Thereafter, the account holder may initiate a transaction in which a value of currency is transferred out of the account to a payee, such as a merchant or retailer, in order to settle any debts owed to the payee. This transaction may take the form of a check written against the account and payable to the payee. Additionally, the transaction may be an electronic transfer of funds from the customer's account to an account held by the payee. Also, the transaction may be a cash withdrawal from the account holder's account, after which the cash is given to the payee.
An overdraft on such an account occurs when the value of a transaction as described above exceeds the value of currency in the account from which funds are drawn. An overdraft may also occur where the value of the currency causes the account to drop below a required minimum balance established by the financial institution. Such overdrafts are considered undesirable by both account holders and by financial institutions. Such transactions are not favored by financial institutions because they must cover the overdraft amount with their own funds when the transaction is honored, or must expend time and resources to notify parties that the transaction is refused. As a result, a surcharge is typically assessed against the account holder's account by the financial institution for the overdraft, regardless of whether the transaction was honored. Banks in the United States assess surcharges that typically ranges from $12 to $28 per transaction regardless of the amount of the overdraft. Because of these fees, account holders typically wish to avoid an overdraft on the account as well. Furthermore, account holders seek to avoid overdrafts because when the transaction is not honored, the account holder is left indebted to the payee for the transaction amount. Causing an overdraft can also be embarrassing to the account holder, especially if the transaction involves a transfer to friends or family members.
Traditionally, a financial institution provides account holders with the opportunity to protect their accounts against such overdrafts by offering traditional overdraft protection programs. These programs guarantee payment of a transaction which would normally result in an overdraft. For example, when a check drawn against a checking account bounces, a bank maintaining the checking account will still honor the check if the account has overdraft protection. Such traditional overdraft protection programs provide protection on a continuing basis for the account. In other words, all qualified transactions for an account with overdraft protection are subject to the program's guarantee of payment without discretion. In general, two kinds of traditional overdraft protection programs are available: credit-based overdraft protection and transfer-based overdraft protection.
In a credit-based overdraft protection program, the financial institution holds the difference between the balance of available funds in the account and the amount of the transaction as a credit balance against the subject account. However, these prior art credit-based overdraft protection programs are limited in that the credit balance is usually restricted to a maximum currency value, e.g. $500.00. Additionally, the credit balance typically accrues interest from the first day it is applied. As a result, the accrued interest can quickly exceed the amount that would have been charged as a surcharge for the overdraft.
In a transfer-based overdraft protection program, a second account owned by the account holder is linked to the first account from which the transaction is processed. If a transaction as described above results in an overdraft, funds from the second account are transferred to the first account to cover the value of the overdraft. However, these prior art transfer-based overdraft protection programs are also limited in that when funds in the second account are insufficient to cover the amount of the overdraft, the financial institution may still refuse to honor the transaction. Furthermore, even when sufficient funds are available in the second account, a transaction fee may be charged against the overdrawn account for completing the transfer from the second account to the first. The transaction fee typically charged by banks in the United States is $5.00 per transfer.
Many account holders are dissatisfied with the “excessive” fees associated with overdrafts and traditional overdraft protection programs. Furthermore, many account holders do not choose to enlist in an overdraft protection program because of the obstacles involved, such as filling out a credit report and allowing the bank to review an account holder's credit history. Generally, financial institutions do not want to alienate their account holders by charging overdraft surcharges, transactions fees and the like. However, these fees generate revenues for financial institutions while discouraging account holders from engaging in transactions that result in an overdraft.
Thus, a need exists for providing an overdraft protection program which overcomes the limitations described above. In particular, a need exists for an overdraft protection program in which the fees charged by financial institutions are not “excessive” in the eyes of its customers, while at the same time, financial institutions can continue to collect sufficient revenue to cover potential overdrafts.
Additionally, an average person typically writes at least a few checks each month, either to pay bills mailed to the person or to pay for transactions at a point of sale. During the check-writing process the person is paying close attention to the check and the information presented therein. This is a marketing opportunity unrecognized by the prior art. Accordingly, a need exists for methods and systems that capitalize on this unrecognized marketing opportunity for the advantage of the account holder, one or more merchants, one or more financial institutions and/or other entities.